Lee Se-hoon, senior deputy governor of the Financial Supervisory Service, speaks during a briefing on the financial consumer protection improvement roadmap and the agency’s organizational restructuring at the Financial Supervisory Service in Yeongdeungpo District, Seoul, on December 22. (Yonhap)
SEOUL, Dec. 23 (Korea Bizwire) — South Korea’s financial watchdog on Monday unveiled an ambitious roadmap to overhaul consumer protection, signaling a shift away from after-the-fact remedies toward preemptive intervention across the life cycle of financial products.
The Financial Supervisory Service said it aims to make 2025 a “foundational year” for substantive consumer protection by embedding safeguards from product design through post-sale management and strengthening on-the-ground enforcement against financial crimes that harm households.
Under the plan, regulators will adopt a risk-based supervision framework that emphasizes early detection — moving from monitoring and risk identification to targeted inspections and corrective action.
Officials cited past losses tied to equity-linked securities as an example, noting that sharp spikes in sales would trigger heightened scrutiny and, if warranted, recommendations for conservative sales practices or even suspension orders.
Consumer protections will be reinforced at every stage of a product’s life cycle. Financial firms will be required to identify and stress-test core risks — such as principal loss in investment products or uncovered events in insurance — at the design stage.
Manufacturers must clearly disclose structural risks to distributors, while sellers will be expected to verify product risks and the issuer’s management capabilities. After sales, investors will receive ongoing disclosures, including early warning alerts for complex products before loss thresholds are breached.
From Warnings to Voiding Contracts, Korea Tightens Consumer Finance Rules (Image supported by ChatGPT)
In a notable departure, the watchdog said it is considering retroactive measures when consumer harm is deemed severe — including the possibility of voiding contracts at their origin, even for products already sold. Senior officials acknowledged legal constraints but said all options remain on the table to prevent widespread harm.
The regulator also pledged a tougher stance on high-risk products, seeking clearer legal authority to halt sales earlier rather than waiting until problems escalate.
Beyond product oversight, the plan calls for stronger enforcement against everyday financial crimes. Mobile inspection teams will intensify crackdowns on illegal lending in vulnerable areas, while a proposed special judicial police framework would enable dedicated investigations into offenses such as voice phishing, insurance fraud, illicit investment schemes and virtual-asset scams.
The roadmap also emphasizes inclusion and transparency. Authorities plan to expand evaluations of banks’ inclusive finance practices, boost credit access for low-income borrowers and improve disclosures to prevent opaque loan-rate changes.
New measures aim to enhance consumer choice and convenience, including AI-assisted services for foreigners and people with disabilities, support for dementia patients conducting transactions via family members, and clearer notifications for paid add-on services.
Taken together, the initiatives underscore the Democratic Party–led government’s push to rebalance the financial system toward prevention, accountability and consumer trust, as regulators seek to curb repeat crises and restore confidence in retail finance.
M. H. Lee (mhlee@koreabizwire.com)
